J. C. Penney Company, Inc

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J. C. Penney Company, Inc Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 2, 2013 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ________________ Commission File Number: 001-15274 J. C. PENNEY COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 26-0037077 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6501 Legacy Drive, Plano, Texas 75024-3698 (Address of principal executive offices) (Zip Code) (972)-431-1000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock of 50 cents par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports ), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter periodـ be submitted and posted pursuant to Rule 405 of Regulation S that the registrant was required to submit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will Kـ not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K. xـor any amendment to this Form 10 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (July 28, 2012). $3,570,280,064 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 219,754,016 shares of Common Stock of 50 cents par value, as of March 1 8, 2013. DOCUMENTS INCORPORATED BY REFERENCE Documents from which portions are incorporated by reference Parts of the Form 10-K into which incorporated J. C. Penney Company, Inc. 2013 Proxy Statement Part III Table of Contents INDEX Page Part I Item 1. Business 3 Item 1A. Risk Factors 5 Item 1B. Unresolved Staff Comments 14 Item 2. Properties 14 Item 3. Legal Proceedings 16 Item 4. Mine Safety Disclosures 16 Part II Item 5. Market for Registrant’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 17 Item 6. Selected Financial Data 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 Item 8. Financial Statements and Supplementary Data 41 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 41 Item 9A. Controls and Procedures 41 Item 9B. Other Information 44 Part III Item 10. Directors, Executive Officers and Corporate Governance 44 Item 11. Executive Compensation 44 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 44 Item 13. Certain Relationships and Related Transactions, and Director Independence 45 Item 14. Principal Accounting Fees and Services 45 Part IV Item 15. Exhibits, Financial Statement Schedules 46 Signatures 47 Index to Consolidated Financial Statements 49 Exhibit Index 88 2 Table of Contents PART I Item 1. Business Business Overview J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The new holding company assumed the name J. C. Penney Company, Inc. (Company). The holding company has no independent assets or operations, and no direct subsidiaries other than JCP. Common stock of the Company is publicly traded under the symbol “JCP” on the New York Stock Exchange. The Company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee by the Company of certain of JCP’s outstanding debt securities is full and unconditional. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this Annual Report on Form 10-K as “we,” “us,” “our,” “ourselves,” “Company” or “jcpenney.” Since our founding by James Cash Penney in 1902, we have grown to be a major retailer, operating 1,104 department stores in 49 states and Puerto Rico as of February 2, 2013. Our fiscal year ends on the Saturday closest to January 31. Unless otherwise stated, references to years in this report relate to fiscal years, rather than to calendar years. Fiscal year 2012 ended on February 2, 2013; fiscal year 2011 ended on January 28, 2012; and fiscal year 2010 ended on January 29, 2011. Fiscal year 2012 consisted of 53 weeks and fiscal years 2011 and 2010 consisted of 52 weeks. Our business consists of selling merchandise and services to consumers through our department stores and through our Internet website at jcp.com. Department stores and Internet generally serve the same type of customers and provide virtually the same mix of merchandise, and department stores accept returns from sales made in stores and via the Internet. We sell family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside jcpenney and home furnishings. In addition, our department stores provide our customers with services such as styling salon, optical, portrait photography and custom decorating. Our merchandise mix of total net sales over the last three years was as follows: 2012 2011 2010 Women’s apparel 23% 25% 24% Men’s apparel and accessories 21% 20% 20% Home 12% 15% 18% Women’s accessories, including Sephora 13% 12% 12% Children’s apparel 12% 12% 11% Family footwear 7% 7% 7% Fine jewelry 7% 4% 4% Services and other 5% 5% 4% 100% 100% 100% Business Strategy At the beginning of 2012, we announced our plans to become America’s favorite store by creating a specialty department store experience. During our first year of transformation, we focused on building a new foundation for the future by reimagining all aspects of our business, including product, presentation, pricing and promotion. We are making substantial changes in our merchandise and continue to edit and introduce more global brands into our merchandise assortment. We are re-organizing our department stores into separately curated unique specialty stores known as The Shops. The Shops will be organized around a pathway through our stores known as The StreetTM, a bold new interface for retail, which includes places to relax, refresh, engage and check out. The Street will surround The SquareTM, a dynamic seasonal space that will provide engaging experiences for our customers. Our pricing strategy is founded on providing merchandise at low everyday prices and delivering even more exciting value through sales, promotions and rewards. During the first year of transformation we opened shops under the Levi's ®, Izod®, Liz Claiborne®, The Original Arizona Jean Co.®, and jcp™ brands. We also opened 78 Sephora inside jcpenney stores, bringing the total to 386. 3 Table of Contents Competition and Seasonality The business of marketing merchandise and services is highly competitive. We are one of the largest department store and e-commerce retailers in the United States, and we have numerous competitors, as further described in Item 1A, Risk Factors. Many factors enter into the competition for the consumer’s patronage, including price, quality, style, service, product mix, convenience and credit availability. Our annual earnings depend to a great extent on the results of operations for the last quarter of the fiscal year, which includes the holiday season, when a significant portion of our sales and profits are recorded. Trademarks The jcpenney®, Fair and SquareTM, jcp®, monet®, Liz Claiborne®, Okie Dokie®, Worthington®, a.n.a®, St.
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